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Bernanke warns of sluggish growth
Friday, 15 February, 2008
US Federal Reserve chairman Ben Bernanke (AAP)
Federal Reserve chairman Ben Bernanke has admitted he sees a period of "sluggish growth" in the US economy.
Mr Bernanke went onto say the economy could pick up later in the year, with help from interest rate cuts and a stimulus plan.
Speaking to a US Senate panel, the Fed Reserve chairman reiterated that the central bank is "carefully evaluating" to protect the economy against a downturn.
Shares dive after comments
However his remarks scared investors on Wall Street overnight, with the Dow plunging a hefty 176.07 points, 1.4 per cent, to a preliminary close of 12,376.17 just after the close of business.
The tech-rich Nasdaq composite finished 41.39 points (1.74 percent) lower at 2,332.54 and the Standard & Poor's 500 broad-market index lost 18.40 points (1.35 percent) to 1,348.81, based on preliminary closing figures.
US economic growth has slowed abruptly in recent months amid a lingering housing market slump and a related credit crunch which has plagued havoc with major banks' finances.
The remarks were the first by Bernanke since Congress approved and President George W. Bush signed a $168-billion economic stimulus plan.
Bernanke told the Senate banking committee that the stimulus plan, which aims to boost consumer and business spending, would help lift economic growth later this year.
"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt," Bernanke said, according to a copy of his prepared remarks.
Fed slashing rates
Meanwhile the Fed has made a series of dramatic interest rate cuts since September, to bring the federal funds rate to 3 per cent from 5.25 per cent.
Among the actions included an emergency 75 basis point cut on January 22 and another half point reduction at its regular meeting a week later.
Bernanke essentially repeated the comments from the January 31 meeting and stated: "The FOMC will be carefully evaluating the incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
On inflation, Bernanke repeated the view that price pressure "should moderate from its recent rates, and the public's longer-term inflation expectations should remain reasonably well anchored."
Source: SBS staff and agencies
Mr Bernanke went onto say the economy could pick up later in the year, with help from interest rate cuts and a stimulus plan.
Speaking to a US Senate panel, the Fed Reserve chairman reiterated that the central bank is "carefully evaluating" to protect the economy against a downturn.
Shares dive after comments
However his remarks scared investors on Wall Street overnight, with the Dow plunging a hefty 176.07 points, 1.4 per cent, to a preliminary close of 12,376.17 just after the close of business.
The tech-rich Nasdaq composite finished 41.39 points (1.74 percent) lower at 2,332.54 and the Standard & Poor's 500 broad-market index lost 18.40 points (1.35 percent) to 1,348.81, based on preliminary closing figures.
US economic growth has slowed abruptly in recent months amid a lingering housing market slump and a related credit crunch which has plagued havoc with major banks' finances.
The remarks were the first by Bernanke since Congress approved and President George W. Bush signed a $168-billion economic stimulus plan.
Bernanke told the Senate banking committee that the stimulus plan, which aims to boost consumer and business spending, would help lift economic growth later this year.
"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt," Bernanke said, according to a copy of his prepared remarks.
Fed slashing rates
Meanwhile the Fed has made a series of dramatic interest rate cuts since September, to bring the federal funds rate to 3 per cent from 5.25 per cent.
Among the actions included an emergency 75 basis point cut on January 22 and another half point reduction at its regular meeting a week later.
Bernanke essentially repeated the comments from the January 31 meeting and stated: "The FOMC will be carefully evaluating the incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
On inflation, Bernanke repeated the view that price pressure "should moderate from its recent rates, and the public's longer-term inflation expectations should remain reasonably well anchored."
Source: SBS staff and agencies
